Why I’m Bearish On Peabody Energy Corporation (BTU)

Rick Pendergraft: Peabody Energy Corporation (NYSE:BTU) is one of the largest coal mining companies in the world and it just so happens that the stock appeared on my bearish scan last night. After reviewing the daily chart, the bearish outlook stands a strong chance of being accurate. The stock has been in a downtrend for the past five months and there is a well defined trend channel that has dictated the boundaries of the downtrend.

The slow stochastic readings just made a bearish crossover and it comes at a time when the stock is the most overbought it has been in over a year. I have marked the last three times the stock reached overbought status based on the stochastic readings. Each of these three times marked on the chart represented a peak before the stock fell 14% or more.

Peabody is expected to announce earnings in the next few weeks, but it is unclear what the exact date will be. The reason I say this is that I checked four different sources and two have the earnings date as April 17 and the other two have the date as April 21. Regardless of the date of the earnings report, the consensus estimate is that the company will break even this quarter. The odd thing about Peabody Energy is that they have beaten their estimated earnings in each of the last four quarters, but the stock hasn’t been able to get out of the downswing.